Kirit Parikh panel submits report on gas prices, suggests pricing freedom beginning Jan 2026

A government-appointed gas price review panel, led by Keret Barikh, presented its report to the government on Wednesday, recommending a minimum and maximum price for old fields and complete pricing freedom from January 1, 2026.

A fixed range of pricing for gas from old fields, which makes up two-thirds of the total natural gas produced in the country, will ensure a predictable pricing regime for producers and at the same time moderate prices for compressed natural gas and pipelined cooking gas which contain up 70 percent since last year on the back of rising in the input cost.

Barikh said that the committee suggested linking the price of gas produced by state-owned companies from the fields granted to them on the basis of designation with the prices of imported crude oil instead of measuring them with gas prices in international markets, adding that the prices reached in this way would be the same. Subject to floor and ceiling.

The State Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation Limited (OIL) will pay a price linked to the imported oil, but will have a floor or floor price of $4 per MMBtu and a maximum or ceiling price of $6.5. .

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This compares to the current rate of $8.57 derived from a formula linked to the rate prevailing in countries with excess gas.

He said the maximum price for that gas from old or old fields, called APM gas, would rise by $0.5 per million British thermal units per year. “Effective January 1, 2027, we have proposed market-determined pricing for APM gas.”

The committee was in favor of not messing with the current pricing formula for fields in challenging geology such as KG-D6 from Reliance Industries and bp plc.

Currently, the fields in deep sea or high temperature and high pressure areas are subject to a different formula which includes the imported LNG cost component but the same is also subject to the ceiling. The cap for these fields is currently $12.46.

He said, “These producers have freedom of marketing and pricing which is constrained by a cap set by the government. We have proposed to continue with the cap for three years and give full freedom to pricing from January 1, 2026, by removing the cap.”

The committee also proposed the inclusion of natural gas in the single state tax system and the tax on goods and services through the inclusion of the consumption tax imposed by the central government and the varying rates of value added tax imposed by the state governments.

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“We recognize that countries have concerns and we are starting a process to build consensus to include gas in the GST system,” he said.

To address states’ concerns of loss of revenue, the panel was in favor of creating a mechanism similar to a compensation offset system that reconciles any loss of revenue incurred by states by granting them the right to levy value-added tax and other taxes on goods. and services in the first five years of GST implementation from 1 July 2017.

Also, the committee was in favor of moderation in excise tax rates.

The committee was tasked with proposing a “fair price to the end consumer” while ensuring “a market-oriented, transparent and credible pricing system for India’s long-term vision of ensuring a gas-based economy.”

“Our mandate was to propose a system that would help increase domestic production to help achieve the target of 15 percent of energy coming from gas by 2030. And at the same time, provide a fair price to consumers,” he said.

He said that the committee considered the pricing of gas from two sources.

The first group is the old or outdated fields which have been awarded to ONGC and OIL on a nomination basis without any profit-sharing requirement, so the price of them is controlled by the government. The second group is for those in difficult geology.

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Gas from old fields is being sold to city gas distributors who have had to raise rates for compressed natural gas and pipelined cooking gas by more than 70 percent after prices rose from $2.90 per mmbtu in March to $6.10 in April and then to $8.57 in April. Last month, reflecting a surge in global averages. This rise in rates, which has narrowed the gap between compressed natural gas and polluting diesel, prompted a revision.

Parikh said that the city’s gas will continue to receive top priority in APM’s gas allocation. The sector would be in a “no-cut” category, meaning that supplies to other consumers would be cut off first in the event of a drop in production.